Good Hair Days

• Good hair days.pdf

Good hair days.pdf

Some timely and much-needed business advice put Hairhouse Warehouse on the path to safe and structured growth. 

Hairhouse Warehouse

Business: Hair care

Franchises: 50

Turnover 2004-05: $39.5 million

Growth: 38%

Chief executive: Joseph Lattouf 

Joseph Lattouf traded his school books for scissors at the age of 15 and became a hairdresser. At 38, he is look­ing towards listing on the Australian Stock Exchange his rapidly expanding Melbourne hairdressing and retail, franchise. Hairhouse Warenouse, which has increased revenue from $15 million to almost $40 million in three years. Lattouf owns two stores and there are 50 franchises. He and his brother Anthony, 45, plan to open another 35 outlets around Australia in 2006.

A lack of business knowledge and experience almost brought the business to the brink of collapse in the early days. Joseph opened his first hairdressing salon in 1987 after finishing his apprenticeship. He soon opened two more, using his two brothers as managers. They noticed women who, after leav­ing a salon, walked over to a Priceline to buy hair-care prod­ucts. Joseph says: “I thought retail was the missing link and decided to open a large store. I wanted a destination where cus­tomers could have their hair cut, body tanning, waxing, a nail bar and buy hair products, from $2 to $300.”

In 1992, he spent $11,000 on a fitout and opened the first Hairhouse Warehouse in Knox, in Melbourne’s south-east, with a partner. “It was not working. In the end, I said [to the partner], “You take it or we’ll take it’. The partner walked away and Anthony went in and turned it from owing $80,000 debt into a profit centre by aggres­sive marketing, getting the biggest range of products, providing outstanding service and best prices.”

In 1993, Joseph put up a sign in the store welcoming franchise inquiries. He says: “We sold them to whoever wanted them, family and staff. We thought we could help anyone change into successful franchisees.” Some people faked interest and copied the concept.

The Lattouf’s struggled along until they met Rod Young, Managing Director of DC Strategy, a franchise consultant, in 2000. Joseph says: “We had 12 stores by then and we knew how to get people in the door but not how to protect our intellectual prop­erty. He pointed out that we could not undo what we had done but said he would provide us with a business plan, processes and infra­structure to go to 60 stores. The first move was to open a special company and trademark everything and put it in the company.

Two groups have since copied the con­cept but the intellectual property protection held. “it [iP protection] cost us so much money. Every bill was for $10,000, $6000 or $20,000. But we wish we had done it earlier because we are protected.”

The brothers also expanded the head office to 20 people, including three marketing staff, three accounting staff and three staff who travel around supporting franchisees. Joseph says: “We spend a lot of time and money developing the franchisee support.” Strict criteria for new franchisees were developed. “Our biggest mistake was poor selection of franchisees. Now we look for strong business acumen, retail and service background.”

Franchises are changing hands for on average, $350,000 with average revenue of $800 000 a year and a 6% ongoing franchise fee Joseph says: “We have never had to close a store.” Store size is likely to increase, from 1.00 square metres. The salon, which took up only 10% of the space five years ago, now covers 40% of the store.

Hairdressing is suffering from the skills shortage. Joseph says: “The franchises have 400 staff and we work hard to moti­vate and retain them by offer­ing incentives, paying well and training.” He has given his staff equity.

Joseph is responding to the retail slowdown with more marketing. A $130,000 televi­sion advertising campaign was launched before Christmas. Joseph says: “Our two million direct-mail catalogue distribu­tions at main times, such as Christmas and Mother’s Day, also worked brilliantly.” He wants to list the business one day. “We want to enjoy the fruits of our labour and also take it international.” 

By Amanda Game
BRW, p74
19-25 January 2006